21 MAR, 2012, 04.48AM IST, DHEERAJ TIWARI,ET BUREAU
NEW DELHI: Concerned over the steep rise in bad loans, the finance ministry has set up a committee to suggest sector-specific mechanisms to address the issue.
This comes soon after the rating agency Moody's downgraded the Union Bank of India one notch on Monday due to its high level of troubled assets and low provisions for coverage. The rating firm had earlier downgraded country's largest lender SBI on the same grounds.
"We have already asked banks to take preventive steps. The working group also has senior bankers who will look at other resolution mechanisms available," said a finance ministry official.
The committee will have representation from the finance ministry, the Reserve Bank of India and some banks. The government has already indicated that containing bad assets will be an important parameter while evaluating the performance of the top brass in state-run banks.
"We are monitoring the situation with banks. There are some sectors where we expect situation to become better in coming days," the official said, adding that some of the announcements made in the budget in reference to raising loans from abroad will lower stress in sectors, such as aviation and power.
Finance Minister in Budget 2012-13 has allowed $1-billion ECB for the airline industry for one year, and allowed foreign debt to part-finance rupee debt taken by power companies and also for affordable housing.
Abanker who attended the meeting on NPA resolution said that the focus is on sectors, such as textile, agriculture and telecom. "It will be a challenge to handle bad loans in agriculture. Some banks are taking help from business correspondents at panchayat level to ensure timely repayment," he said.
Lending to the farm sector has slowed down due to rise in bad loans. In November 2010, the share of farm loans was 13.10%, which had dropped to 11.18% in November 2011.
"In our meeting with RBI, we had said that textiles, steel, mining and aviation are the broad sectors where there is stress. Since agriculture is a priority sector, there will be no constraints," said an executive director of a north-based bank.
This comes soon after the rating agency Moody's downgraded the Union Bank of India one notch on Monday due to its high level of troubled assets and low provisions for coverage. The rating firm had earlier downgraded country's largest lender SBI on the same grounds.
"We have already asked banks to take preventive steps. The working group also has senior bankers who will look at other resolution mechanisms available," said a finance ministry official.
The committee will have representation from the finance ministry, the Reserve Bank of India and some banks. The government has already indicated that containing bad assets will be an important parameter while evaluating the performance of the top brass in state-run banks.
"We are monitoring the situation with banks. There are some sectors where we expect situation to become better in coming days," the official said, adding that some of the announcements made in the budget in reference to raising loans from abroad will lower stress in sectors, such as aviation and power.
Finance Minister in Budget 2012-13 has allowed $1-billion ECB for the airline industry for one year, and allowed foreign debt to part-finance rupee debt taken by power companies and also for affordable housing.
Abanker who attended the meeting on NPA resolution said that the focus is on sectors, such as textile, agriculture and telecom. "It will be a challenge to handle bad loans in agriculture. Some banks are taking help from business correspondents at panchayat level to ensure timely repayment," he said.
Lending to the farm sector has slowed down due to rise in bad loans. In November 2010, the share of farm loans was 13.10%, which had dropped to 11.18% in November 2011.
"In our meeting with RBI, we had said that textiles, steel, mining and aviation are the broad sectors where there is stress. Since agriculture is a priority sector, there will be no constraints," said an executive director of a north-based bank.
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